Vulnerabilities in Emerging Southeastern Europe - How Much Cause for Concern?

46 Pages Posted: 25 Jan 2008

See all articles by Piritta Sorsa

Piritta Sorsa

International Monetary Fund (IMF)

Bas Berend Bakker

International Monetary Fund (IMF)

Christoph K. Duenwald

International Monetary Fund (IMF)

Andrea Michaela Maechler

International Monetary Fund (IMF)

Andrew Tiffin

International Monetary Fund (IMF)

Date Written: October 2007

Abstract

While large inflows of capital into Southeastern Europe (SEE) have raised incomes, this has increased vulnerability to financial risks, which, if realized, can lead to costly adjustments. Traditional vulnerability indicators in SEE have reached levels that in other countries have not been sustainable, and sectoral analysis shows rising imbalances and raises questions about efficient use of the inflows. While factors related to EU integration mitigate these vulnerabilities, weaker institutions reduce these benefits in SEE compared to more advanced European emerging markets. To insure against setbacks to income convergence, SEE policymakers should take measures to reverse the buildup of vulnerabilities.

Keywords: Working Paper, Economic indicators, Europe, Capital inflows, Emerging markets, Adjustment process, Crisis prevention

Suggested Citation

Sorsa, Piritta and Bakker, Bas Berend and Duenwald, Christoph K. and Maechler, Andrea Michaela and Tiffin, Andrew, Vulnerabilities in Emerging Southeastern Europe - How Much Cause for Concern? (October 2007). IMF Working Paper No. 07/236, Available at SSRN: https://ssrn.com/abstract=1087155

Piritta Sorsa

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Bas Berend Bakker

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Christoph K. Duenwald

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Andrea Michaela Maechler (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Andrew Tiffin

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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